Kauai’s Tourism Industry Continues to Drive Island’s Economic Growth

A destination doesn’t want to become too terribly dependent on tourism, but Kauai’s steady growth and modest development help avoid boom and bust scenarios.

— Jason Clampet

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Kauai’s tourism-led economic expansion is expected to continue through at least next year, a University of Hawaii economist said Thursday.

Kauai visitor arrivals have been growing since 2009 and are on track to total 1.1 million in 2013, even with 2012 but down from the peak of 1.3 million in 2007, Jack Suyderhoud said at the 39th Annual First Hawaiian Bank Outlook Forum at the Grand Hyatt Kauai Resort & Spa.

Meanwhile, visitor spending continued to grow at a healthy clip, rising to $868 million through the first seven months of 2013 from $757 million during the same period in 2012.

Kauai is more dependent on tourism than other islands as measured by a ratio of visitors to the resident population, Suyderhoud said. Kauai leads all islands with a ratio three times as large as Oahu, he said.

Kauai also is more reliant on visitors who stay in time shares, individual vacation units and condominium hotels, according to Suyderhoud.

“This has its good points since many of these types of visitors are returnees and tend to stay longer. On the other hand, they also tend to spend less,” he said.

Although Kauai’s visitor industry has been robust, Kauai’s job growth has recovered slowly, according to the report. Kauai lost an estimated 3,500 jobs between early 2008 and early 2010, but only about 1,600 of those have returned, Suyderhoud said.

“The recession affected Kauai more than the rest of the state as the unemployment rate on Kauai soared to over 10 percent in 2009, well above the statewide peak,” he said.

A lack of any significant construction activity on the island has contributed to the anemic job market. Private building permits have shown only “modest improvement” since mid-2011, Suyderhoud said. So far, the construction industry has been supported largely by government projects, such as the county spending on roads and water system improvements, he said. The construction of Grove Farm’s Hokulei Center, scheduled to open in 2014, is expected to give construction a boost.

Kauai’s real estate market is showing “clear positive trends,” Suyderhoud said. If single-family and condominium sales continue at their current pace, volumes for 2013 should exceed 2007 levels, according to Suyderhoud.